Apple Recovers As US Tech Shares Hit By China Slump

Apple warded off a slump in technology shares that hit several major US companies on Monday, after chief executive Tim Cook took the unusual step of writing to reassure investors over the health of the company’s business in China.

“Obviously I can’t predict the future, but our performance so far this quarter is reassuring,” Cook said in comments emailed to Jim Cramer, host of CNBC’s television programme Mad Money. “Additionally, I continue to believe China represents an unprecedented opportunity over the long term.”

Chinese ‘acceleration’

He said growth in iPhone activations has “accelerated” over the past few weeks in China, and that the company had its best performance of the year for the Chinese App Store over the past two weeks.

In the comments, Cook acknowledged that it was unusual for Apple to respond to share-price movements outside of its scheduled earnings announcements.

The slump in US shares was spurred by a plummet in Chinese markets on Monday and a recent devaluation of the yuan, which have raised fresh fears over whether the world’s second-largest economy can deliver the growth that officials have forecast.

Apple, like other major IT companies, is dependent upon the Chinese market for fueling growth.

In May Gartner found that rising iPhone demand in Greater China had turned the region into Apple’s largest market for the first time, outstripping even North America.

Along with other major US tech shares, Apple opened lower on Monday, opening 10 percent down and losing $78 billion (£50bn) in value. But after sinking as much as 13 percent, the shares overcame those losses over the course of the day to return to positive territory, finally closing the day 2.47 percent down at $103.15.

Tech shares down

Other US tech shares were more badly hit, with Netflix down 6.8 percent at the close of trading, Google down 4 percent, Facebook down 4.6 percent, Microsoft down 3.2 percent and Twitter down 2.7 percent. All had recorded substantial losses during the course of the day.

During Apple’s July earnings announcement, during another turbulent period for the Chinese economy, Cook also reassured investors, saying he remained “bullish on China” and calling the market turmoil a “speed bump”.

However, industry analysts remain concerned that the Chinese smartphone market may be near saturation, with analysts Gartner reporting last week that smartphone sales fell in the country for the first time ever in the previous quarter.

Apple has continued to gain market share in China nevertheless, as it has elsewhere in the world, with the company saying the iPhone 6 range is its best-selling model to date.

Chinese turbulence

Monday’s sell-off represented the biggest drop in US shares for four years, with the S&P and Nasdaq indices both down 10 percent on recent peaks.

London’s FTSE 100 index shed nearly £74bn of its value, with European markets seeing their worst day of trading since 2011. The market declines also affected Australian and Japanese markets.

But Chinese markets remained the worst hit, with the Shanghai composite index closing 8.5 percent lower in the biggest drop since 2007.

Furthermore, on Tuesday Chinese shares extended the losses, with the Shanghai index closing another 7.6 percent lower at 2,964 points.

But European shares rose in early trading on Tuesday, with the FTSeurofirst 300 index, which is made up of Europe’s largest companies, clawing back some 200bn euros of the 500bn euros it lost on Monday.

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